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Northwestern and Central Diamond Clusters in Russia

10 may 2016

Developing diamond production clusters in the Russian Federation may be viewed as a way to improving the competitiveness of the national diamond industry. At present, there are three diamond clusters almost taking their final shape in this country: the Central, Northwestern and Far Eastern Diamond Clusters. Each of them is different and includes various diamond business segments. This article describes the Central and Northwestern Diamond Clusters.
 
The diamond cluster in the northwest of the Russian Federation is embracing a number of operations engaged in the extraction and production of diamonds.

In the Arkhangelsk Region, diamonds are mined by Severalmaz, OAO belonging to ALROSA Group and operating since 2008. Lukoil, OAO is another diamond miner there, which started to develop the Grib Mine in the area in June 2014 producing about 1.4 million carats of rough diamonds.

Table 6

analyt_10052016_eng.jpg

Besides, this cluster includes:

- Burevestnik, OAO (St. Petersburg), a business unit of ALROSA Group engaged in production of diamond ore concentration equipment, including X-ray luminescent separators of different types;

- Archangelskgeoldobycha, OAO, a subsidiary of LUKOIL, OAO;

- Grib Diamonds, a diamond trading subsidiary of LUKOIL, OAO;

- INREAL, a company established in the early 1990s, which is the country’s leading producer of technical diamond products and diamond grinding powder, having two independent offshoots:

- Nevsky Brilliant, OOO, which is manufacturing polished diamonds of all sizes from natural rough diamonds;

- New Diamond Technology, OOO, which is focused on the production of large-size single-crystal diamonds for diamond-based micro and power electronics, optics, as well as for the tool-making and jewelry industries. Its current project, Sestroretsk Diamond Pipe is producing synthetic nitrogen-free diamonds. It is expected that this project will yield as much diamonds as it is produced by one of the diamond mining units of ALROSA. These three companies formed a diamond holding engaged in waste-free diamond production. Its goods are requested by a variety of industries, including those manufacturing high-tech equipment.

Businesses and organizations of the Central Diamond Cluster are mainly engaged in diamond trade and diamond manufacturing. Some of them carry out strategic management functions with regard to the country's diamond industry and are located in Moscow and in the center of the European part of the Russian Federation.

These are the Ministry of Finance, Gokhran, United Selling Organization of ALROSA and this company’s office with its senior management, as well as the financial institutions associated with the diamond business.

ALROSA has diamond cutting operations in Moscow, Orel and Barnaul. The company abandoned the vertical integration strategy, focusing mainly on diamond mining. Its polished sales reached $ 144.4 million in 2014.

Kristall, OAO based in Smolensk remains the largest diamond manufacturer in Russia. It posted polished sales exceeding $ 300 million in 2014. A separate place among diamond cutting businesses is occupied by the diamond cutting and jewelry operation run by Lev Leviev’s Ruiz Group, a vertically integrated corporation, which is processing the entire amount of diamonds mined by Uralalmaz, ZAO and mainly selling its final goods outside Russia.

Summary and recommendations

1. Thus, we can say that the diamond industry of the Russian Federation, which may serve as an example for imitation for the country’s other industries by some of its production indicators, has formed three inter-related cluster structures being instrumental to turning it into a global diamond industry leader.

2. Given that the Central and Northwestern regions of Russia have a strong scientific base, it is possible to study the surface properties of diamonds and diamond films with a view to develop new technologies for producing synthetic diamonds for the jewelry industry. However, it appears more promising to use synthetic diamonds in microelectronics and nano-technologies. This will contribute to further development of the diamond industry in the country maintaining its pace-setting position in the world.

3. The development of the diamond business in Russia cannot be viewed in isolation from the changes taking place in the world economy, which may face a second wave of the global crisis, almost certainly resulting in reduced demand for luxury goods, and, consequently, for diamond goods as well. The factors, that have arisen in recent years, such as the economic sanctions imposed on Russia by the West, the instability in the Middle East, the powerful migration flow from the Middle East and Africa to Europe and the strengthening of terrorist threats, are shifting the development vector of Russia’s diamond industry in the eastern direction.

Yuri Danilov, Ph. D., CEO of the ‘Expert’ Information and Analysis Center at Ammosov North-Eastern Federal University